Senate considers bill to help small businesses

| 7/1/2010

It seems U.S. lawmakers are getting the message that small-business owners need some financial relief to stay afloat during these rocky economic times.

On Tuesday, June 29, the U.S. Senate voted 66-33 to begin debate on a tax and lending measure for small-business owners. The Small Business Jobs Act is designed to help small businesses access capital and increase their ability to make investments by allowing small-business owners to “write off the cost of purchases for their businesses.”

In a statement about the proposed legislation, Senate Finance Committee Chairman Max Baucus, D-MT, said it is designed to “provide small businesses with the vital access to capital they need to create jobs.”

The Senate bill would establish a Small Business Lending Fund, designed to get money flowing into the hands of small-business owners. The House passed its version of the bill on June 17. 

Recently, Paul G. Merski, senior vice president and chief economist for the Independent Community Bankers of America – ICBA – told Land Line that the $30 billion lending fund may lead to $300 billion in lending and is targeted at community banks with $10 billion or less in assets that typically work with small businesses, including truckers.

“So it’s not going to the Wall Street banks, but it’s going to the banks that actually focus on small-business lending that are in the communities and have relationships with local small-business owners,” Merski said.

In his view, what stands out about this bill is that there are incentives for banks to lend this money once they borrow it from the U.S. Treasury. Merski said that while banks must pay an initial 5 percent dividend on the amount they borrow, that percent can go down to 1 percent if banks increase their small business lending by 10 percent or more.

However, the percentage goes up to 7 percent after two years, then 9 percent after four years and six months if the banks do not lend the money.

“So it wouldn’t make any sense for a bank that didn’t have any lending opportunities and the desire to lend to pull down the capital and pay very high costs of that capital,” he said.

– By Clarissa Kell-Holland, staff writer